Affordable Care Act and Its Implications for Our

Patients and Our Practices

Presented byAllan Peiser CPA, MBA

Affordable Care Act

Intent - to increase access to health insurance coverage, expand federal private health insurance market requirements and create health insurance exchanges to provide certain individual and small employers with access to insurance.

Affordable Care Act

Large Employer – an employer who

employed an average of at least 50 full-

time equivalent employees (FTEs) on

business days during the preceding

calendar year.• 7/2/13 - Information reporting requirements and

Employer Shared Responsibility Provisions have been

delayed until 2015

Affordable Care Act

Small Employer – Employers that on an

average business day employ at least 1 but

not more than 50 employees. (If you have

fewer than 50 employees, but are a member

of an ownership group with 50 or more full-

time equivalent employees, you are subject

to the rules for large employers.• Delays announced on 7/2/13 DO NOT impact small

employers

Affordable Care Act

Provisions• Provides coverage for dependent adult

children up to the age of 26

• Eliminates discrimination for pre-existing conditions

• Removes lifetime limits on health benefits

• Defines Essential Health Benefits to be required in insurance plans

Affordable Care Act

Essential Health Benefits• Ambulatory patient services• Emergency services• Hospitalization• Maternity and newborn care• Mental health and substance use• Prescription drugs• Rehabilitative services and devices• Laboratory services• Preventive and wellness services and

chronic disease mgmt.• Pediatric services, including oral and

vision care

Affordable Care Act

Provisions• Guaranteed issue and renewability

• Insurance premium restrictions• Age (no more than 3:1)• Geography• Family size• Tobacco use

• Establishes a health insurance “marketplace”

Affordable Care ActHealthcare Exchanges – State or Federal health

insurance “marketplaces” mandated by the ACA to

offer affordable coverage for small business and

individuals. Exchanges are responsible for calculating

premiums subsidies, enrollment, quality oversight, certification

of qualified health plans that can be sold in the exchange, and

other matters. They are meant to make the process of

selecting insurance easier and transparent. Open

enrollment begins Oct. 1, 2013 with coverage starting

as soon as Jan. 1, 2014.

Affordable Care Act

The Small Business Health Options Program (SHOP) is a new program that simplifies the process of buying health insurance for your small business.

• For 2014, the SHOP Marketplace is open to employers with 50 or fewer full-time-equivalent employees (FTEs). The advantages of using SHOP include:

• You control the coverage you offer and how much you pay toward employee premiums.

• You can compare health plans online on an apples-to-apples basis, which helps you make a decision that's right for your business.

Affordable Care Act

Marketplace Plan Categories• 4 categories based on the % the plan pays of the

average overall cost of providing ESB to members

• The plan you choose affects the total amount you’ll spend for EHB during the year

• Bronze – 60%• Silver – 70%• Gold – 80%• Platinum – 90%

• The percentage is not the same as coinsurance

Affordable Care Act

Impact on Small Employers• Not required to provide health insurance,

however, if you do offer coverage it must be at least a bronze plan

• Not required to report on W-2

W-2 reporting is optional for employers

required to file fewer than 250 forms W-2 for

the preceding calendar year (determined

without application of any entity aggregation

rules for related employers)

• Required to inform employees of exchanges

Affordable Care ActImpact on Small Employers

• Required to inform employees of

exchanges• Current employees – Notice Must Be Provided No

Later Than 10/1/13

• Inform employees about the existence of the Exchange and give a description of the services provided by the Exchange

• Explain how employees may be eligible for a premium tax credit or cost-sharing reduction if the employer’s plan does not meet certain requirements

• Inform employees that if they purchase coverage through the Exchange, they may lose any employer contribution toward the cost of employer-provided coverage, and that all or a portion of this employer contribution may be excludable for federal income tax purposes

• Include contact information for the Exchange and an explanation of appeal rights

Affordable Care ActImpact on Small Employers

• New hires

• Employers must provide the notice to each new employee at the time of hiring beginning 10/1/13

• For 2014 DOL will consider a notice to be provided at the time of hiring if the notices is provided within 14 days of an employee's start date

• Notice must be provided in writing in a manner “calculated to be understood by the average employee

• Notice can be provided via 1st class mail or electronically

• Notice must be given to all employees regardless of full or part time status

Sample language from the US Department of Labor is provided in your handout for these required notifications

Affordable Care Act

Individual Mandate• Individuals must obtain acceptable health

insurance for themselves and their family members or pay a penalty.• Penalties - $95 per person or 1% of income for

2014 $325 per person or 2% of income for

2015 $695 per person or 2.5% or income for

2016 & later• In 2014 the fee for uninsured children is $47.50 per

child. The most a family would have to pay in 2014 is $285

• After open enrollment ends on March 31, 2014, they won't be able to get health coverage through the Marketplace until the next annual enrollment period, unless they have a qualifying life event

Affordable Care Act

Individual Mandate• Individuals must carry minimum essential

coverage• Any Marketplace plan, or any individual insurance plan you already have

• Any employer plan (including COBRA), with or without “grandfathered” status. This includes retiree plans

• Medicare• Medicaid• The Children's Health Insurance Program (CHIP)• TRICARE (for current service members and military retirees, their families, and survivors)

• Veterans health care programs• Peace Corps Volunteer plans

Affordable Care Act

Individual Mandate• Penalty Exemptions for Individuals who:

• Are uninsured for less than 3 months of the year• Are determined to have very low income and coverage is considered unaffordable

• Are not required to file a tax return because their income is too low

• Would qualify under the new income limits for Medicaid, but their state has chosen not to expand Medicaid eligibility

• Are a member of a federally recognized Indian tribe• Participate in a health care sharing ministry• Are a member of a recognized religious sect with religious objections to health insurance

Affordable Care Act & Dental

CoverageThe ACA includes pediatric oral health

benefits on its list of 10 Essential Health

Benefit that must be offered by qualified

health plans operating in the state

exchanges. Pediatric is defined as persons

under the age of 19 (although states have

the flexibility to extend such coverage

beyond the age 19 baseline).

Affordable Care Act & Dental

CoverageHHS Guidance provided in Feb. 2013 regarding coverage of pediatric dental services:

• Within the Exchange plans can:1. Provide comprehensive coverage including pediatric

oral health benefits or2. Where “stand-alone” dental plans exist they may

exclude coverage

• Outside the Exchanges - “plans may offer EHB that exclude pediatric dental benefits if they are “reasonably assured” that such coverage is sold only to individuals who purchase Exchange certified stand-alone dental plans”

Affordable Care Act & Dental

Coverage• The ADA interprets the guidance to

mean that within the Exchange the dental EHB need only be offered but outside the Exchange it is required.

• The guidance as it is written may be confusing to buyers and some may not purchase coverage for their children either accidentally or intentionally.

• Dental services for adults are not mandated

Affordable Care Act & Dental

CoverageProjections from the ADA

• ~ 8.7 million children could gain extensive dental coverage by 2018

• 17.7 million adults could gain some sort of dental coverage through the ACA

• 11 million pediatric private dental visits added/ 1.7 million adult private dental visits

• ~ Limited Medicaid expansion by some states will affect coverage for adults

Credits

• Individual Health Care Tax Credits• Meant to ensure people can obtain affordable coverage

• For people with incomes higher than Medicaid and below 400% of poverty level and are not eligible for or offered other acceptable coverage

• Credits apply to both premiums and cost-sharing

•Expansion of adoption credit

Credits•Small Business Tax Credit

• 25 or fewer full-time equivalent employees making an average of $50k or less

• Pay at least 50% of your full-time employees’ premium costs

• Purchase your coverage through SHOP

• Worth up to 50% of your premium costs.

• i.e. - a business owner has10 employees,

$250k in total wages, and contributes $70k

toward premiums would get a $35k tax

credit

Fees and Taxes

• Excise tax on medical device

manufacturers

• Increased Tax on Withdrawals from HSAs

• Comparative Effectiveness Research Fees• Increased Threshold for Medical Expense

Deductions

• Excise tax on high-cost employer plans

• Tax on indoor tanning services

• Medicare Part D Subsidy Deduction

Eliminated

Tax on Self Employed Income

• Medicare tax increase beginning in 2013• 0.9% Medicare Hospital Insurance (HI) tax• on self-employed individuals and employees• on earnings and wages received during the year above specified thresholds

• individual wages of an employee in excess of $200,000

• joint return in excess of $250,000

Tax on Self Employed Income

Net Income $400,000 Salary & Benefits -$400,000 Profit $0

Individual Income Tax Return Salary $400,000 Profit -$0 Taxable Income $400,000

Self-Employment Tax – Applies to income over $250,000 MFJ

Taxable Income $150,000 Tax rate X 3.9% Tax Owed $5,850

Net Income $400,000 Salary & Benefits -$250,000 Profit $150,000

Individual Income Tax Return Salary $250,000 Profit +$150,000 Taxable Income $400,000

Self-Employment Tax – Applies to income over $250,000 MFJ

Taxable Income $0 Tax rate X 3.9% Tax Owed $0

Savings of $5,850

Net Investment Income

For purposes of the 3.8% tax Net Investment Income is define in Code Sec. 1411(c) as “investment income” reduced by the deductions properly allocable to such income plus the sum of:

• Gross income from• Interest• Dividends• Annuities• Royalties• Rents• Passive income

• Other gross income derived from any business to which the tax applies

• Net gain attributable to the disposition of property other than property held in a trade or business to which the tax does not apply

Other Changes

Recently Enacted Tax Law ChangesAffecting Individuals

• Bonus depreciation. The 2010 Act extends for two years 50-percent bonus depreciation for qualified property. Bonus depreciation will be available for qualified property placed in service before January 1, 2013

• Expensing. The 2010 Act provides that, for tax years beginning in 2012, the Section 179 small-business expensing limitation will be $125,000. The limitation will be reduced if the cost of the Section 179 property for that year exceeds $500,000. Those amounts will return to $25,000 and $200,000, respectively, after 2012.

MAGIIn computing MAGI for purposes of the 3.8% threshold, gross income does not include items such as interest on tax-exempt bonds, veterans’ benefits, and excluded gain from the sale of a principal residence that are otherwise excluded from income.

Watch out for theses situations:

• Gain over and above the $250,000 amount protected by the principal residence exclusion does increase MAGI as well as net investment income

• Lump-sum distributions from retirement plans, while excluded from net investment income, are included in MAGI

• Converting traditional IRAs to Roth IRAs after 2012 will increase MAGI by the amount of the converted amount

Planning for 2014Planning in Uncertain Times

• Adopt a multiyear perspective in reviewing your tax situation, evaluating the tax implications of shifting income or deductions.

• Consider the effect of the AMT. The expected outcome of deferring or accelerating income and deductions may be different after determining the AMT consequences. The result may not necessarily be intuitive.

• View transactions with regard to both their economic and tax implications.

• Stay engaged with understanding the tax changes debated or adopted by Washington. Be prepared to act quickly once Congress agrees on tax rates or reform.

Planning for 2014Ordinary Income

• If you believe ordinary tax rates will increase, you may want to consider accelerating receipt of commissions, bonuses, nonqualified stock option exercises, or billings prior to 2014.

• If you are generating a net operating loss (NOL) and believe that ordinary rates will rise, you should consider having your NOL carried forward to offset future ordinary income taxed at higher rates, rather than carried back to offset income taxed at lower rates. Careful modeling of this decision is critical and must focus on cash flow as well as tax considerations.

Planning for 2014Medicare Tax

• Consider rebalancing your investment portfolio by increasing investments in growth assets and decreasing emphasis on dividend-paying assets prior to 2014.

• Passive income is subject to the 3.8-percent unearned income tax; therefore, if you have multiple passive activities, consider reviewing current grouping elections in light of any new factual patterns for each activity that may reclass such activity from passive to active or vice versa.

Investment Income

• Determine whether it is better to invest funds in a taxable account or a tax-deferred account, and consider asset allocation and investment strategies in light of the impact of tax rates on portfolio income.

Healthcare Reform Resources

HealthCare.gov

ADA.org – search healthcare reform

IRS.gov – Affordable Care Act Tax Provisions

Homepage

HealthReformGPS.org

If you have any questions please feel free to

contact Allan or Erick at:

Allan - 214-635-2503APeiser@GPPcpa.com

Erick - 214-635-2541ECutler@GPPcpa.com